Yellen, US Treasury Secretary, Follows the Trail of Big Money

As if caught in an ever-increasing hurricane, US Treasury Secretary Janet Yellen was rocked from side to side this week over the issue of how government and financial authorities should support wealthy uninsured bank depositors.

Treasury Secretary Janet Yellen testifies in a House Budget Committee hearing [House Appropriations Committee on Budget and Oversight] on March 23, 2023 in Washington. [AP Photo/Jose Luis Magana]

On Tuesday, she told a meeting of bankers that the government was prepared to extend the bailout of depositors at Silicon Valley Bank and Signature Bank, some of whom hold tens of millions of dollars in their accounts, to other depositors in other banks if necessary.

This was correctly recognized as an implied guarantee by the government that it was insuring all the money held in the US banking system, a total of over $17 trillion, and thus provoked criticism from “free market” advocates. “, in particular Wall Street Journal (WSJ).

The main concern of the WSJ is not the distribution of money to the rich and super-rich per se, but what such a guarantee ultimately means for the stability of public finances and American capitalism as a whole, if the market cannot do its job in carrying out necessary purges.

In response to this and other criticism, Yellen told a Senate committee the next day that financial bodies were not considering “blanket” coverage for deposits above the $250,000 limit covered by the legislation.

Wall Street dismissed Yellen’s remarks. It fell sharply in the last half hour of trading on Wednesday, with the Dow Jones losing more than 500 points.

The Treasury Secretary, who like all government officials tries to present herself as serving the mass of the population, got the message from the real power-holders.

In her address to the House on Thursday, she backtracked on remarks made at the bankers’ meeting two days earlier.

“We used important instruments to act quickly to prevent contagion,” she said. “And these are instruments that we could use again. The strong measures we have taken guarantee the security of Americans’ deposits. We would certainly be ready to take additional measures if necessary. Following his remarks, Wall Street stabilized.

To understand what the issuance of deposit guarantees entails, it is worth digging deeper into what the figures put forward mean.

Deposits up to $250,000 are automatically guaranteed by the Federal Deposit Insurance Corporation as required by law.

The cutoff point is far greater than the amount held by millions of American families who live hand-to-mouth, often having to resort to their credit cards just to make ends meet.

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According to official figures, the median balance held by US citizens in their accounts is just $5,300.

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